When dealing with commission-style sales incentive plan designs the question of whether to include a maximum reward, or cap, usually raises its controversial head.  In a pay-for-performance environment you might not think that limiting reward opportunities would be a debatable issue – but the battle lines are drawn.

Sales management is aghast at the thought of limiting or reining in the success of a hard charging sales employee.  Don’t fire them up, only to cool them down, is the thought.  The idea of telling an employee that they won’t be rewarded for closing further deals is their nightmare scenario.

On the other hand the Finance folks, affectionately known as “bean counters” out in the field, tend to look at the same question from an opposing perspective.  They fear that a combination of windfall sales (sudden and arbitrary success achieved with minimal employee effort), possible inappropriate or unethical sales practices and / or poor quota setting processes could provide not only an undue amount of reward but going forward may encourage the wrong sort of behavior.

Behavior rewarded is behavior repeated, they say.

For Finance a cap in rewards will avoid what they consider excessive earnings for large, unexpected orders that have fallen into an employee’s lap.  As the argument goes, if we’re rewarding employees for their selling effort, and there is little effort, why provide a reward?  Or shouldn’t that reward be limited?

As you can see, both functions are approaching this performance issue from differing viewpoints.  Sales management understands and is concerned over the demotivational impact of reducing or eliminating rewards when the sales employee is doing exactly what they’re supposed to do.  Selling.  If you reward an employee for achieving 110% of plan targets, why not reward them for achieving 150%?  Or 200%?  To sales management capping goes against common sense.  To them holding back the sales force is holding back business success.  Because no one expects a sales employee to continue trying to make sales when the reward for such efforts has been taken off the table.

However, the Finance argument does have merit, and their concerns need to be addressed by the company’s sales incentive design and operating processes.

Considerations:

• Windfalls: the company should have in place a policy to address rewards for such unexpected sales.   Employees should be made aware that limitations can be put in place (case-by-case review) when achieved sales are due less to effort on the part of the employee than to factors beyond the employee’s control.

• Inappropriate sales practices: while everyone can agree that using unscrupulous or unethical behavior to achieve sales results is a serious breach of company conduct, it seems a bit of overkill to legislate behavior (introducing a cap) in a way that restricts the success of all sales employees.

• Quota setting: the concerns raised due to an ineffectual quota setting system should be addressed through an audit and revamping of those associated processes, not through what would be considered a penalty for those positively affected by that quota.  While the focus here is on rewards for potentially easy-to-achieve target quotas, we often fail to find a corresponding concern to help employees overcome (be rewarded for) those quota targets that are unduly difficult.

• Taper vs. Cap: using a bell-shaped curve to model reward opportunities, it is common practice for commission plans to reduce the incremental percentage of reward (commission rate, % of target bonus, etc.) as ever higher performance far exceeds target

Sales incentive plan designs should focus on the greater concern, that of possibly discouraging sales employees.  When fixed costs have been met, and each additional revenue dollar above target is a win for the company, let the employee win at the same time.  It just might spur on others to match that success.

Have you ever considered what sort of an impression you make on others at work?  No man is an island and all that, so consider that each of us causes ripples among the people we interface with, whether direct or indirect.  We leave a mark, for good or ill.

You will have three audiences who are interested and watching; the management above you, peers and colleagues, and those below you in the organization’s hierarchy – whether subordinates or rank and file employees.  Now picture each group pondering your actions and developing an opinion.

• Management: bosses and senior leaders who can have a direct impact on your career.  You want these folks to nod their head and smile when they think of you.  You would like to be known by name and face.

• Peers: you have to work with these people, to interface with enough human relations skills to get things done.  The goal is assist work processes and people to run as smoothly as possible.  You want respect here.

• Rank and file: either your subordinates or those affected by your decisions / recommendations.  These are those who may be dependent on you, but may also whisper about you, or spread nasty rumors – or can rally to your cause.  You ignore these people at your peril.

Each group has a separate agenda, and over time you as a professional practitioner or manager will have developed a reputation by your actions, your decisions (or lack) and through the word of mouth of those who interact with you.  The net result is a label, a persona that surrounds you, describes you and marks you as a “type.”

We all get reduced to a “type.”  Now ask yourself, would the people you work with, or work for, want to spend time with someone like you?  In other words, are you someone admired, someone viewed as a valuable source of experience, someone to learn from?  Someone worth knowing?

Or would these same folks cross the street to avoid you?

And this is important because . . . ?

Would you want to have a drink with someone like yourself?   If you would, what is it about that persona that you think would make sharing social time a worthwhile effort?  If you’d rather not waste your time, what is it about that person in the mirror that’s such a turnoff?

A number of years ago I cut back on my attendance at Compensation conferences.  It wasn’t the subject matter, or the cost, or even the locations so much.  It was that the growth and maturation of my career as a compensation professional had moved in a different direction from many of my colleagues.  I preferred to have that drink with other “types.”

Most in the profession are very intelligent; many are even brilliant technical practitioners.   But that is not what this is about.  This a matter of whether that technical savvy, that textbook learning can be converted on a daily basis into the effective application of that knowledge and skill within the work environment; how that application impacts and interacts with those around you.

Too many managers and practitioners don’t get it when it comes to dealing with employees – and as Compensation has a direct and constant impact on those employees, this ability to deal with the human element becomes of necessity a critical component of your success – or failure.

Do you see yourself as others see you?

• Do you have a reputation as a numbers person, or a people person – or perhaps you’re viewed as presenting a balance between the company and the employees?

• Is your interpersonal style one of engagement, or do you prefer to be left alone, to operate as an individual contributor best left to their own devices?

• Are you more comfortable dealing with theories and concepts, or facts & figures, vs. dealing hands on with the political and emotional realities of the workplace?  Numbers people are often uncomfortable in dealing with employees.

• Are you sensitive to the question being asked?  Do those around you sense empathy or arrogance – or simply aloofness?

Recently I refereed an argument about whether the cost of living or the cost of labor was more important in setting annual merit spend budgets.  The debaters battled with charts & graphs, regressed formulae and reams of statistics – when a bit of common sense and practical experience would have shown how senior management would react.

Both practitioners missed the point, lost within the argument over technical accuracy and blind to the dynamics of human nature; both ignored common sense and the reality of employee perceptions.  Both turned off their audience by their high-toned professorial statements.

Not the sort of reputation you’d like have at work, is it?    Not with everyone watching, keeping score.

A well-rounded compensation pro not only understands the technical side, the analytical side to providing competitive rewards in an effective and efficient manner, but is equally comfortable dealing with the softer side, the people side of the profession.

Having an understanding that real people are affected by recommendations, that morale, productivity and engagement have a price tag as real as payroll dollars flowing out of the company, is a critical awareness that every manager should have.

Once you have that combination in place, adding a bit of persuasiveness, of knowing how to change behaviors, will be like having the mortar that holds all the bricks together.

Then you’ll have a complete (mostly) compensation pro.

That’s someone I’d like to have a drink with.

Do you remember this line from the movie “A Few Good Men”?  Jack Nicholson told Tom Cruise that average folk couldn’t deal with the harsher facts of life, so as a result higher ups would tell them what they wanted to hear.  They would offer excuses, verbal hedges that sidestepped reality and offered the illusion of comfort.

Today we have an economic recession that is causing employee job stress, concern for the future and more than a few sleepless nights.  In these circumstances company management can choose to deal from either the top or the bottom of the deck with their internal communications, as they face the question of whether employees can handle the truth.

The issues raised could be pending layoffs, reduced or frozen pay increases, hiring freezes, reorganizations or other such “bad news.”

Management messaging can either be straightforward regarding current events, why it was happening and how circumstances would affect emnployees, or they could toss out a series of artful communication hedges (excuses).  In other words, employees could be fed “corporate-speak.”

This would be a headquarters-generated sleight-of-hand communications effort, typically crafted by smooth-tongued professional writers vs. subject matter experts.  The prose, approved by corporate legal to insure that no liability is stated or implied, minimizes the negative and accentuates the positive.  The intent is to say little of substance, while at the same time making a self-congratulatory production of their communication efforts.

Content is usually a combination of feel-good phraseology intended to instill a sense of confidence that, whatever the problem, management is; a) doing the best they can, b) not at fault, c) has the interests of the employees firmly in mind, and d) will be providing more details soon.

When these officious corporate pronouncements inevitably provide little in the way of satisfactory answers, employees turn to their managers to get straight information.  However, when the going gets rough (challenging, complex, contentious), many managers will waffle, dribble their thoughts, obfuscate and make their own excuses.  They may even a point a finger at HR.  Poorly trained managers have difficulty facing issues important to employees, without trying to pass the buck.  Employees want to know why? what next? and what about me?, but managers are rarely equipped to offer an effective response.

When the straight story is not forthcoming, employees will tend to read between the lines and form their own perceptions of the company message, and that view is less reliable than the grapevine for spreading accurate information.  It is also more skeptical.

• “Where are they going to go?”: employees are trapped in their jobs, with little choice but to remain, because other opportunities will be hard to find.  Management has implied, “we don’t need to do anything for them.”

• “Everyone else is cutting back, so we have to as well”: this trite phrase only gets dragged out when the circumstances save the company money.  Has the “everyone else” phrase ever been used to support giving something to employees?

• “In anticipation of difficult economic times ahead we are forced to / reluctantly / have no choice but . . . . “: this is a pre-emptive strike while the sun is still shining.  It is a particularly onerous practice if rewards for past performance are cut, and is often viewed by those on the receiving end as a breach of trust.

• “We employ average workers, so they should be satisfied . . . .”: perhaps an after-the-fact rationalization, but sometimes your senior leadership feels that most employees are easily replaced, like a commodity.

Not surprising, the reaction to such doomsday communication efforts is always negative, planting seeds in your workforce for a bitter harvest of lowered morale and increasing disengagement.

• The ineffective message lacks credibility with an increasingly skeptical audience, as does the messenger and the organization behind it

• Employee listening (and attention) ceases as insincerity is recognized, so the communication effort is wasted

• Engagement and performance levels drop as trust, confidence and loyalty erode and employees start to ask themselves, “why bother?”

• The supposition gains traction that the company is lying, holding back or not telling the whole story.  It is hard to see the glass as half-full with this reaction.

On the other hand, when the message is honest, straightforward and without guile the opposite reaction occurs:

• Organizational credibility is strengthened

• Company loyalty is fostered

• Engagement levels and management support are improved

The implication is clear; employees can handle the truth, rightly expect same from their employer, and will not take kindly to bland corporate-speak.  So do not get caught making excuses; it didn’t work when you tried it with your mother, and it won’t work with your employees either.

Do you want to be admired and respected by your colleagues, recognized by senior leadership for who and what you are?  Do you want to be known throughout your universe as one who sets the standard?

Then solve a problem.  Stand up and show someone how to get things done.  Clear the pathway; support someone’s idea, save a step somewhere.  Do what it takes.

Just do it.

It’s not hard, really.  It’s a matter of thinking not of yourself first and foremost, but of a greater good that is broader than yourself – and of focusing your attention on getting the results that help the department, the team, the business.   It’s called a giving of yourself.

All too often what we see from many employees at all levels of the organization is an effort to be the star, the success story, but at the expense of someone else.  “Look at me,” these eager A-types seem to shout, “look at what I have achieved.”  These are folks who seem to have missed reading the memo on team effort.

We all have them in our organization.  They surround us.

Here’s a thought, though.  Isn’t it better to be lifted up (reward, recognition, etc) by someone else, then to be constantly trying to push yourself up there?  Doesn’t that ego rush get a bit tiring, what with the constant pressure of looking over your shoulder to gauge the competition?  Do you get periodic stress headaches, where the muscles at the back of your neck tighten to stone?  Are you sleeping well?

Now picture yourself receiving that award, with the accompanying recognition, spotlight, accolades etc.  Nice feeling, isn’t it?  A proud moment.

I think it does make a difference in how one gets recognized.  I suppose that there are levels of self-satisfaction, but the highest must be when you’re lifted on someone’s shoulder.   When you hear the cheer of the audience.  Self advertisement, political deal-making and a passive resistance that holds others back can’t provide the same level of genuine personal satisfaction.  Because deep down you’ll know you cheated to get there.

Think about someone whom you really admire, in whatever field of endeavor you like.   Chances are it’s someone who has accomplished something, delivered the desired results, made something of themselves.   They stood up for something, right?  Likely that person you admire so much isn’t someone who took shortcuts, pushed others aside, ignored the call for help or otherwise kept their focus solely on the mirror.

So why would you want to do that yourself?

Of course you wouldn’t.  But now reflect a bit on how you practice your relationships at work.  Do you admire yourself, or can you spruce up your act a bit and become more of a team player?

Naive?  Perhaps I am.  But I think we need more heroes out there, more decision-makers, more team players and more people willing to make a stand for what they believe in.

But that’s just me.